A) Listed below is the probability distribution of the rates of return associated with 2 stocks, RST corporation and ABC Inc. If an investor were to put in $40,000 in RST and $60,000 in ABC, calculate his portfolio’s expected return and standard deviation.
|State of Economy||Probability||RST Corp.||ABC Inc.|
B) If treasury securities are currently yielding 3%, the expected market risk premium is 7%, RST’s beta is 1.3, and ABC’s beta is 0.8, is the portfolio appropriately valued? Explain your answer. Get Finance homework help today
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